GM, Peugeot Form Global Strategic Alliance

2/29/2012 1:52 PM ET

U.S. automaker General Motors Co. (GM: Quote) and French automaker PSA Peugeot Citroen said Wednesday that they are forming a global strategic alliance that will leverage the combined strengths and capabilities of the two companies, contribute to their profitability and strongly improve their competitiveness in Europe.

Under the alliance, the automakers will share vehicle platforms, components and modules; and create a global purchasing joint venture to buy commodities, components and other goods with combined annual purchasing volumes of about $125 billion.

The alliance will be supervised by a global steering committee that includes an equal number of senior executives from each company.

The companies estimate total synergies from the alliance at about $2 billion annually within about five years.

However, each company will continue to market and sell its vehicles independently and on a competitive basis.

As part of the agreement, GM plans to acquire a 7% equity stake in Peugeot, making it the second largest shareholder behind the Peugeot Family Group, which owns just under 31%.

In connection with the alliance, Paris-based Peugeot is expected to raise about €1 billion through a capital increase with preferential subscription rights for Peugeot shareholders, including an investment from the Peugeot Family Group.

"This partnership brings tremendous opportunity for our two companies," said Dan Akerson, GM chairman and CEO. "The alliance synergies, in addition to our independent plans, position GM for long-term sustainable profitability in Europe."

Philippe Varin, chairman of the managing board of PSA Peugeot Citroën, declared, "This alliance is a tremendously exciting moment for both groups and this partnership is rich in its development potential. With the strong support of our historical shareholder and the arrival of a new and prestigious shareholder, the whole group is mobilized to reap the full benefit of this agreement."

Both Peugeot and GM's Opel unit are struggling with slow sales and overcapacity in Europe. Both the automakers are trying hard to reverse mounting European losses.

"This alliance enhances but does not replace either company's ongoing independent efforts to return their European operations to sustainable profitability," the two companies said in a statement Wednesday.
GM shares are currently trading at $26.17, up 3 cents. Peugeot shares closed down 2.11% at €15.05 in Paris.